Clause 187 - Repeal of drawback on British compounds and spirits of wine

Part of Finance Bill – in a Public Bill Committee at 6:30 pm on 19 June 2012.

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Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 6:30, 19 June 2012

I thank my hon. Friend. Let me make a little more progress and I suspect I will be able to deal with his concern. I will define and clarify for the Committee what is meant by rectifiers and compounders, and turn from there to those who might warehouse products.

HMRC conducted a review of the regime for rectifiers and compounders. A rectifier is someone who is licensed by HMRC to re-distil spirits, for example, in the manufacture of UK-produced neutral spirit. A compounder is someone who is licensed by HMRC to combine or mix plain spirits with any other substance, so as to alter distinctly the character or flavour of the original spirits, for example in the manufacture of UK-produced gin.

HMRC’s review established that ALDA section 22 was no longer being used by businesses, so was ripe for repeal. I regret I cannot say whether those businesses split their responses according to warehousing duties and activities, and other activities, but I would be happy to speak to my hon. Friend after the Committee has risen and provide a little more information, if I do not manage to answer his points.

Changes made by the clause will remove ALDA section 22 from the statute book. Rectifiers and compounders will be unaffected by the repeal, because they no longer use ALDA section 22. They have told us that, and we in HMRC feel that we can go ahead. They will not have to change their procedures as a result of the measure. The consultation I referred to was, I think, broad enough, although since it took place in October 2010, I was not the Minister involved. I am very happy to go back and see what I can find further to reassure my hon. Friend. Those who wish to claim drawback will be able to use the EGDR, as I set out. That follows the procedure set out in HMRC Notice 207 in relation to excise duty and drawback. That change has been accepted by industry and will have no effect, as I said, on the practices of rectifiers and compounders.

HMRC will, however, carry out a review of the associated secondary legislation, the Spirits Rectifying, Compounding and Drawback Regulations 1988—fascinating as I am sure they are—in the next 12 months. Those regulations set out specific requirements placed on rectifiers and compounders. The review will identify any changes necessary to the regulations, particularly as a result of the repeal of ALDA section 22.

In conclusion, if I have been able to reassure my hon. Friend sufficiently, this measure supports the Government’s objective of simplifying the tax system by removing  redundant legislation from the statute book. I am hopeful that the full consultation undertaken by HMRC means that this piece of legislation was no longer used by businesses. No objections were raised to its repeal.